I am presenting your Bank''s Annual Report and financial statements for
the year 2015-16. I would like to share with you the performance
highlights and financial indicators of the Bank during the year.

Economic Scenario

India is doing well on macroeconomic aspects with the growth rate of
7.9 per cent, moderate inflation of 5.39 per cent, current account
surplus, controlled fiscal deficit and large forex reserves of US$360
billion. However the country is not insulated from global shocks &
internal blows. On the external front, exports which account for 23% of
India''s GDP have been contracting since December 2014. A sharp decline
is seen in petroleum and crude, agriculture and allied products, ores
and minerals, and electronic goods. On the domestic side, though the
urban consumption growth has benefited from lower inflation and oil
prices, the rural economy is still fragile. On investment side,
corporate balance sheets are stressed and fresh investments are not
being undertaken. Large corporates are unwilling to borrow due to their
high debt levels and weak demand. While corporates are unwilling to
borrow, banks are focusing on retail & SME to drive growth. However,
PSBs registered a tepid credit growth of 4.59 per cent as on March
2015-16.

Banking sector, especially PSBs, continue to struggle with rising NPAs.
The gross NPA ratio of PSBs increased from 5.02% in March 2015 to 9.30%
by March 2016. However, the government has initiated several policy
reforms in core sectors; they are yet to yield results and kick-start
investment activity. The easing price pressures have allowed RBI to
reduce the benchmark interest rate to a five- year low of 6.5%. The
central bank is also working with the government to clean up as much as
$120 billion of stressed assets at commercial banks, extend financial
services to India''s remote villages and rid the system of perverse
incentives that encourage companies to default on payments.

The economy is expected to grow at 8% during FY2016-17, with the 94%
increase in allocation for the farm sector by the Union Budget,
fast-tracking of irrigation projects, increase in farm credit, higher
allocation to MGNREGA and extension of interest rate subvention to
farmers etc. Allocation for infrastructure-related sectors rose by
42.7% y-o-y for FY17. Public investments on infrastructure can help to
ease the low capacity utilisation situation in most industries.
Infrastructure spending will have a multiplier effect of creating
demand for steel, cement, capital goods and commercial vehicles, and
spurring fresh investments in manufacturing. On the face of it, bank
credits expected to clock double digit growth for FY2016-17.

Performance Highlights – 2015-16

The performance of your Bank has to be evaluated and judged by esteemed
stakeholders against the economic scenario witnessed by us during the
last one year.

Net investments of the bank decreased to Rs. 79189.55 Crs as of 31st
March 2016 from Rs.81310.34* Crs as on 31st March 2015. Total profit
including sale of securities & profit on exchange amounted to Rs.
699.58 Crores during the year 2015-16 as against Rs.772.23 Crores of
2014-15. 10- year benchmark yield has gone down from 7.81% to 7.46%
during the year. The return on total investments before amortization
for the year 2015-16 is 7.56% as against 7.64% in 2014-15. (*Includes
investment in IRDF amounting to Rs.2012.25 Cr. as on 31.03.2015)

Advances:

Gross Advaces stood at Rs.1,72,727 crore as on 31st March 2016 as
against Rs.1,79,041 crore as on 31st March 2015. As the Bank was in
consolidation mode, credit growth was contained consciously, in the
backdrop of low credit off-take.

NET PROFIT:

Net loss for the year ended 31.03.2016 is Rs.2897.33 crore and for Q4
Rs.936 crore as against net loss of Rs.1425 crore in Q3 of 2015-16. Net
loss for the year ended 31.03.2015 was Rs.454.33 crore.

Due to increased provisions of Rs 5782 crore against operating profit
of Rs 2885 crore on NPA, Restructured accounts, Taxes and fresh
slippages of accounts to NPA under prime sector of the economy, which
resulted the denial of income accrued thereon for our profit, resulted
in net loss for the year.

During the year under review, the Bank has opened 34 branches across
the country. Out of 34 branches opened during 2015-16, 26 branches
(76.47%) are located in Rural and Semi Urban centres, of which 8
branches are located in Unbanked Rural Centres. These new branches have
enabled the Bank to enhance new relationship and spread Bank''s Network
covering all states.

Other Highlights:-

- The percentage of priority sector advances to Adjusted Net Bank
Credit stood at 40.29% as against RBI norms of minimum 40%.

- Business per employee stood at 12.41 crore as on 31.03.2016.

- Gross NPA as at 31st March 2016 was at Rs. 30,049 crore with Gross
NPA ratio of 17.40% and Net NPA stood at 11.89%.

- Provision Coverage Ratio stood at 47.39% as on 31.03.2016.

- Capital Adequacy Ratio

The Bank''s Capital Adequacy Ratio as on 31.3.2016 stood at 9.66% as per
Basel III norms, which is above the requirement of 9.625% prescribed by
RBI.

Bank has incurred a net loss of Rs 2897.33 crore during the financial
year ended 31.03.2016. Hence the Board of Directors has not recommended
any dividend, as the Bank does not confirm to eligibility criteria
prescribed by GOI/RBI.

- IT INITIATIVES:

Bank has embarked on Technology Upgrade and IT Transformation, to
improve the operational efficiency and customer service. All domestic
branches and other offices have been successfully migrated from In
house software "CROWN" to the outsourced Finacle 10 Software. This will
improve customer satisfaction level and facilitate the customers to
conduct their banking operations from home 24/7 in a faster manner.
Mobile banking solution through smart phone applications and real time
funds transfer (IMPS) has been launched along with other new IT
initiatives. IOB Debit card payment option in IRCTC site has been
enabled.

- Para banking:-

In the area of Para-banking, Bank is concentrating on marketing of
insurance products and IT enabled products. The Bank continues with
its Corporate Agency arrangement entered into with LIC of India for
distribution of Life Insurance products, Universal Sompo General
Insurance Company Limited (the Non-Life Insurance Joint Venture
Company) for distribution of non-life insurance products and Apollo
Munich Health Insurance (Standalone Health Insurance partner) for
distribution of Health Insurance Products.

As part of the efforts to improve profitability, bank lays renewed
emphasis on improving the CASA ratio, improve Net Interest Margin,
reduction of NPAs to a large extent through intensive recovery measures
like conducting frequent Lok Adalats / Recovery Camps, One-Time
Settlements and resorting to legal action under SARFAESI Act and sale
of financial assets in eligible accounts.

- Overseas Operations:-

As regards our overseas operations, we have eight full- fledged
overseas branches – two in Hong Kong, Bangkok and Sri Lanka and one
each in Singapore and South Korea. We also have remittance Centers
operating at Boon Lay and Serangoon, Singapore. During August 2013,
bank has upgraded the Extension Counter at Sri Lanka into a branch with
due regulatory approvals increasing the number of branches at Sri Lanka
to two. During August 2014, Sukhumvit, Bangkok commenced operations
increasing the number of branches in Bangkok to two. The Bank''s
Representative Offices are located in Guangzhou (China), Ho Chi Minh
City (Vietnam) and Al Karama, (Dubai). Bank is taking up for/awaiting
RBI permission for upgrading its representative office at Dubai,
Vietnam and China into full fledged branches.

Ministry of Finance, Government of India has allocated the following
overseas centres for opening of overseas JV/WOS by the Bank. 1.
Thailand, 2. Vietnam, 3.Mongolia, 4. Srilanka and 5. Republic of Korea.

Our Bank has signed a joint venture agreement with Bank of Baroda and
Andhra Bank to open a Banking subsidiary in Malaysia. The Joint venture
has been duly incorporated at Malaysia on 13.08.2010 by name "India
International Bank (Malaysia) Ltd." BHD and the banking Joint Venture
has started functioning from July 2012.

- Pradhan Mantri Jan Dhan Yojana (PMJDY):

The Bank is implementing PMJDY as per the directives of Govt. of India.
The Scheme was launched by the Prime Minister of India on 15th August
2014. The Bank has opened 38,62,633 BSBD Accounts and issued 37,30,544
RuPay Debit Cards till 31st March 2016 under this scheme.

- Awards won by IOB:-

- Chamber of Indian Micro Small & Medium Enterprises, Delhi have given
the following awards for Indian Overseas Bank in 2015-16.

- MSME Banking Excellence Awards 2015.

- Best Eco-Tech Savvy Bank for Mid-Sized Bank - Winner

- Best Bank under MUDRA Yojna for Mid-Sized Bank - Winner

- Best Bank for Promotional Scheme for Mid-Sized Bank - Runner Up

- IOB In-House magazine "VANI" (Official Language) has been given First
Prize by Government of India in ''C'' region in 2015-16.

- IOB In-House magazine "VANI" (Official Language) has been given
Second Prize from Reserve Bank of India in the year 2015-16.

- Our Commitment:-

The bank resolves to achieve continuous and meaningful growth by making
effective use of its human resources and leveraging its large network
of branches and technology amidst the competitive and challenging
environment in the industry in order to expand our market share and to
improve values and returns to all our stakeholders.

- Acknowledgements:-

I take this opportunity to thank the members of the Board, the
Government of India and the Reserve bank of India for their valuable
support and guidance. I thank all our customers for their continued
patronage and the opportunity given to us to serve them and nurture
business relationship. I also place on record my appreciation for the
dedication and commitment put in by our staff members. The valuable
support of our stakeholders and the confidence they repose on the bank
will motivate us to work with renewed vigour to improve business
performance year after year.

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